Shree Sanatan Dharm Sabha of NSW Inc v Satya Mani & Anor

Supreme Court of NSW|2006-02-10|Before: Brereton J

CITATION : Shree Sanatan Dharm Sabha of NSW Inc v Satya Mani & Anor [2006] NSWSC 96

DECISION : Paragraphs [23], [24], [25].

CATCHWORDS : ASSOCIATIONS - Meetings - Interlocutory injunction to restrain holding of meeting - where seriously arguable case that meeting would not be valid - where meeting proceedings would cause confusion - where defendants had not availed of opportunity to challenge status of new committee at earlier stage - balance of convenience

LEGISLATION CITED : Associations Incorporation Act 1984 (NSW ), ss 26, 26(3), 26(7)

PARTIES : Shree Sanatan Dharm Sabha of NSW Inc Satya Mani & Anor

10 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

1338/06 Shree Sanatan Dharm Sabha of NSW Inc v Satya Mani & Anor JUDGMENT (ex tempore) 1 HIS HONOUR: The plaintiff, Shree Sanatan Dharm Sabha of NSW Inc, is an association incorporated under the Associations Incorporation Act 1984 (NSW), which no doubt plays an important role in the religious and cultural lives of its members. Under its Constitution it is governed by a Management Committee to be elected annually at an Annual General Meeting, nominations for which close seven days prior to the Annual General Meeting. The defendants were elected respectively to the office of Secretary and President at an Annual General Meeting held on 25 July 2004, which I shall call the 2004 Annual General Meeting. At a purported Annual General Meeting held on 3 July 2005, they were not re-elected. The defendants have purported to convene an Annual General Meeting to be held on 19 February 2006 for which nominations will close on 12 February 2006, two days hence. The plaintiff - for present purposes, under the control of the Committee elected at the purported Annual General Meeting of 3 July 2005, which I shall call the 2005 Committee - seeks an interlocutory injunction to restrain the defendants from convening that meeting. 2 On an application such as the present for an interlocutory injunction, the question is whether the plaintiff has established a sufficiently seriously arguable case for final relief, to justify the grant of interlocutory relief having regard to the balance of convenience. Stating the test in that way recognises, first, that the plaintiff bears the onus of making out a case for interlocutory relief, secondly, that there must be a serious question to be tried before one considers the balance of convenience, and thirdly, that the strength of the serious question to be tried may be relevant to what is required to tip the balance of convenience one way or the other. 3 On an application such as this, one does not make findings of fact on a final basis, and in the summary which follows it should be understood that I am not resolving any contested factual issue between the parties, but merely stating, and that in short form, what I find on the evidence presently before me to be seriously arguable. It should also be understood that I have rejected as irrelevant to the present limited application evidence which may well be relevant to other aspects of the relief, both interlocutory and final, which the plaintiff claims in its Notice of Motion and summons, but which is not pressed before me today. 4 Following the 2004 Annual General Meeting held on 25 July 2004, differences arose between the defendants and the other committee members. On 8 May 2005, the 2004 Committee resolved that it had no confidence in the first defendant, and appointed 29 May 2005 for a further meeting to enable him to respond to certain allegations against him. Notice of that further meeting was given to the first defendant on 10 May. The defendant did not attend the meeting on 29 May, at which the Committee determined not to prefer any form of disciplinary action under the Constitution, but instead, among other things, to convene the 2005 Annual General Meeting on 3 July 2005. 5 Under the Association's Constitution, the Committee consists of the office bearers of the Sabha and seven ordinary committee members, each of whom should be elected at the Annual General Meeting of the Sabha pursuant to rule 16. The committee members, subject to the Rules, hold office until the conclusion of the next following AGM and are eligible for re-election. Under rule 16, nominations of candidates for election as office bearers of the Sabha or as ordinary members of the Committee shall be made in writing, signed by two members and accompanied by the written consent of the candidate and shall be delivered to the Secretary not less than seven days before the date fixed for the holding of the AGM at which the election is to take place. Under rule 24, the Sabha shall, at least once in each calendar year and within the period of six months after the expiration of each financial year, convene an Annual General Meeting, but that is subject to any extension or permission granted by the Fair Trading Commission under s 26(3) of the Associations Incorporation Act. Under rule 25, the Annual General Meeting shall, subject to the Act and rule 24, be convened on such date and at such place and time as the Committee thinks fit.

6 The Associations Incorporation Act, s 26 provides that an association shall, at least once in each calendar year and within the period of six months after the expiration of each financial year, convene an Annual General Meeting. Provision is made for the Director-General on application to extend that period of six months, or to permit an Annual General Meeting to be held in a calendar year other than that in which it would otherwise be required to be held. Where an incorporated association fails to comply with the provisions of s 26, it and each member of its Committee is guilty of an offence and liable to a penalty not exceeding two penalty units. 7 Consequent upon the resolution of 29 May 2005 and in the absence of the Secretary/first defendant, the Assistant Secretary, appointed as part of the 2004 Committee, circulated notice of the 2005 Annual General Meeting to members on 3 June 2005. As I understand it, the defendants contend that such notice was not given to all members, that the notice was not approved by the Management Committee, and that it was not given by the Secretary as required by the Constitution, but by the Assistant Secretary. 8 After the notice of 3 June 2005 was issued, the defendants instructed solicitors, who on their behalf raised objection to the calling of the 2005 AGM, and threatened to apply to the Court for an injunction to restrain the holding of the meeting if no undertaking not to proceed with it was forthcoming. But they did not do so, and 11 of the 14 members of the 2004 Committee signed a memorandum, confirming that they had resolved to convene the 2005 AGM for 3 July 2005. The 2005 AGM proceeded on 3 July 2005, and a committee and office bearers, constituting the 2005 Committee, were declared elected.

9 Since then, dispute has continued as to the validity of the 2005 AGM and as to the standing of the 2005 Committee and office bearers, and all attempts at resolution of those disputes have so far failed. On 24 October 2005, solicitors acting for the defendants wrote to Mr Krishna, the Treasurer on the 2005 Committee, maintaining that the 2005 Annual General Meeting was invalid, seeking undertakings - including acknowledgment of the status of the defendants as Secretary and President respectively - and again threatening to make an application to the Court for an injunction before early November if those undertakings were not forthcoming. No such undertakings were given, but no such application was brought. 10 Some time in or about December 2005 the second defendant received a letter from the Office of Fair Trading which, he says, expressed a requirement to resolve the dispute and bring the affairs of the Association into order, and to require a response by 16 December. It seems that on 15 December the second defendant lodged with the Office of Fair Trading an application for an extension of time within which to hold the Annual General Meeting for the purposes of s 26(3) of the Act. On 11 January 2006, the Office of Fair Trading sent a letter to the first defendant referring to the application for extension of time and expressing approval of the Association's request to hold the Annual General Meeting on 19 February 2006. 11 The second defendant thereupon convened at his residence a meeting of some, but not all, of the persons who had been members of the 2004 Committee. Notice was not given to those persons who, though they had been members of the 2004 Committee, were not aligned with the defendants. This "meeting" resolved to convene an AGM on 19 February 2006, with the consequence that nominations for any election at such AGM would close on 12 February. The first defendant, purporting to be the Secretary of the Association, issued notices of that proposed meeting on or about 26 January 2006. 12 On 8 February 2006, the plaintiff obtained leave to file a summons and Notice of Motion claiming interlocutory and final relief, including declarations as to the validity of the 2005 AGM and to the effect that the office bearers and Committee declared elected at the 2005 AGM were duly and validly elected and held office as such, as well as interlocutory relief restraining the proposed meeting for 19 February and other interlocutory relief. The Notice of Motion returned before the Court this morning. Some of the supporting evidence, including, in particular, the bundle of exhibits referred to in the affidavits, without which the affidavits would make very little sense to a reader, were not served within the time for which service was abridged and Mr Prakash, who appeared today for the defendants, sought an adjournment of the present application until next week. Mr Smallbone, of counsel, who appeared for plaintiff, pressed today only so much of the application for interlocutory relief as would restrain the holding of the meeting on 19 February. I declined Mr Prakash's application for an adjournment because, on the limited understanding I then had of the case at that stage, from reading the affidavit material, it seemed to me that the fate of the proposed meeting on 19 February would not likely be affected by further evidence and that, in any event, it was necessary to make some determination, even if only a preliminary one before nominations closed on 12 February. The benefit of further argument and further consideration has reinforced my view that it is appropriate to deal today with the question of restraining the holding of the proposed Annual General Meeting on 19 February. 13 I am satisfied there is at least a seriously arguable case that the 2005 AGM was duly convened and that the 2005 office bearers and Committee members were validly elected - and, therefore, that the proposed meeting would not be validly convened. It may well be, in due course, that some defect in the process of calling the 2005 AGM can be identified, but in this respect it is relevant that when there was an opportunity to move for an injunction to restrain that meeting being held, it was not availed of, nor was an injunction sought in October or November of last year when again the prospect of restraining the 2005 Committee from acting as such arose. At first sight, the argument that the Notice of Meeting was given by the Assistant Secretary rather than the Secretary it not an impressive one. The requirement that it be given by the Secretary is, I think, not a precondition of the validity of the meeting, more so where it is given by the person who is, in effect, the Secretary's deputy. 14 Moreover, upon the assumption that the 2005 AGM on 3 July 2005 was not duly convened, and that the 2005 Committee was not validity elected and, therefore, that the 2004 Committee would remain in office, there is, nonetheless, a seriously arguable case that the recent purported committee meeting cannot validly have convened an AGM for 19 February. The power of convening an AGM is given to the Committee, and not to selected members of the Committee. The meeting which the second defendant described was only of selected members of the 2004 Committee, no notice having been given to other members of that Committee. Accordingly, the meeting could not have been a meeting of the 2004 Committee, even if it remains in office, and could not have convened an AGM for 19 February 2006. So much is, I think, at least seriously arguable. 15 On the question of the validity of the process by which the meeting which has been convened for 19 February has been called, the extension of time apparently granted by the Office of Fair Trading is irrelevant. The mere fact that a regulatory authority has approved a request to hold an AGM out of time does not give validity to a committee's resolution to convene a meeting, let alone to a resolution to that effect by a body which was not the 2004 Committee. 16 It follows that there is a seriously arguable case that the meeting proposed to be held on 19 February 2006 has not been duly and validly convened. Mr Prakash, responsibly and realistically, did not argue to the contrary. Whether an injunction should be granted, therefore, turns on considerations of the balance of convenience. 17 The prejudice said by Mr Smallbone to arise from declining to grant an injunction is that the members of the 2005 Committee would, in order to protect their position, effectively be compelled to lend legitimacy to a process which they dispute, by lodging their nominations by this Sunday 12 February, as if they did not do so, they run the risk of exclusion if ultimately the meeting proves to be validly convened. The prejudice said to be suffered by the defendants from the granting of an injunction was their potential exposure to penalties under s 26(7) of the Act, for failing to convene an Annual General Meeting within time if they were restrained from doing so. 18 The consideration identified by Mr Smallbone is germane to whether it is necessary to grant an injunction today, as distinct from waiting until some time next week when the defendants can have an opportunity to adduce further evidence before deciding whether the Annual General Meeting should be restrained. But deferral of the matter until next week would only require revisiting the balance of convenience, which I think can be sufficiently addressed now. 19 On the face of the correspondence before me, and the submissions which I have heard, it is, I think, improbable that further evidence would affect whether or not there is a serious question to be tried. In other words, I do not think that that position is going to be changed between now and next week by the adducing of further evidence. The correspondence on both sides is before me, and that correspondence sets out the positions of both factions to the dispute. Given the oral evidence of the first plaintiff as to who was and who was not notified of the recent purported meeting of the 2004 Committee, it is highly improbable that further evidence would result in the Court concluding that there was no serious question to be tried as to the validity of the proposed meeting. If that be right, then the Court is simply going to have to consider next week rather than today whether the balance of the convenience favours restraining the meeting. 20 On that question, in addition to the prejudice identified by Mr Smallbone as being relevant to whether an injunction should be granted before nominations close, are the increased confusion in the affairs of the Association which will arise, if the meeting is allowed to proceed; the potential jeopardy to the assets of the Association which may arise from having two competing committees claiming authority; and the difficulties in the conduct of an election, for example compliance with the requirement that nominations be sent to the "Secretary", when there is dispute as to who is the Secretary. These are but some illustrations of the potential prejudice to the Association which may arise from allowing a disputed meeting and election to proceed before resolving whether or not it has been duly called.

21 Given that what purports to have been an AGM was held on 2 July 2005, and that the defendants could, in the face of a prosecution for a contravention of s 26(7), convincingly argue that they have done everything in their power to convene an AGM within the time extended by the Commissioner of Fair Trading, the possibility that the grant of an injunction might result in a contravention of that section by the Association and, therefore, by them as committee members of that Association, does not, in my mind, outweigh the other considerations to which I have referred. 22 I am also influenced by the circumstance that the defendants have twice threatened to seek injunctive relief, but have ultimately not done so. In short, they have had seven months to dispute in a court of law the standing of the 2005 Committee, and have not availed themselves of the opportunity of doing so to this point, despite threats that they would. 23 Accordingly, I am of the view the balance of convenience favours the granting rather than the withholding of injunctive relief. 24 Upon the plaintiff, by its counsel, giving to the Court the usual undertaking as to damages, I order that the defendants and each of them be restrained until further order from, by themselves, their servants or agents, convening, conducting or holding or purporting to convene, conduct or hold any meeting of the members of the plaintiff on 19 February 2006 or to consider the business or substantially the same business or any part of it as is set out in the Notice of Meeting signed by the first defendant and dated 26 January 2006. Costs of this application will be costs in the cause. 25 The Summons and Notice of Motion are adjourned to 9.30am on Tuesday 14 February 2006 before the Registrar.

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Associations Incorporation Act 1984(NSW)

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